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How Aussies can fight back against price gouging

In Australia, we pride ourselves on being the land of the fair go. But there’s nothing fair about the businesses we all rely on for our everyday needs taking advantage of the market power they hold and taking advantage of Australians by engaging in price gouging. 

Supermarkets are the backbone of our nation’s food supply chain, but in recent times there has been much talk of price gouging, with accusations that our supermarkets have used inflation as a cover to push through price increases higher than what they need to cover their own rising costs.

Releasing the results of the Australian Council of Trade Union’s recent price gouging inquiry, former Australian Consumer and Competition Commission chair Allan Fels coined this ‘excuse-flation’, and said it was one of several different pricing practices businesses use to exploit their customers.

It doesn’t help that in Australia we have a supermarket duopoly – with both Coles and Woolworths having a much greater market share and pricing power than Aldi, IGA and other independent operators. 

Supermarkets are often guilty of another exploitative pricing practice identified by Professor Fels – rockets and feathers. This describes the situation where a business is quick to increase its prices when costs increase, but slow to cut them once those cost pressures ease. This played out towards the end of last year when the price farmers were getting for lamb fell sharply but supermarket lamb prices remained high.  Sound familiar? Similarly, banks are quick to increase interest rates inline with the RBA increases but fail to apply those interest rates to savings accounts. 

We’ve also seen huge price increases in general insurance with premiums rising at their fastest rate in 22 years. According to the Australian Bureau of Statistics, premiums for home and motor insurance increased by over 16% on average in 2023.

Increasing claims costs due to more frequent and severe weather events driven by climate change has been blamed, and while there is an element of truth to that, with Australian insurance companies suffering their biggest claim event in history with the 2022 floods, they still managed to post huge profits in their latest financial results. 

Telstra also announced healthy profits after it hiked the prices of its mobile phone plans by as much as 20% in mid-2023. It said the price hikes allowed it to continue investing in the network as well as being a response to increasing costs. 

In the case of the insurers and telecos, both use confusion pricing and loyalty pricing to exploit vulnerable consumers. Confusion pricing involves intentionally making it difficult for consumers to understand pricing, which makes comparison shopping difficult, and works hand in hand with loyalty pricing, which sees existing customers charged more than new ones. 

While education and advocacy are essential tools in the fight against consumer exploitation and price gouging, we also need robust government intervention to hold businesses accountable and protect consumers’ rights.

Some may argue that businesses are obligated to put the interests of their shareholders first, ahead of those of their customers. But the demise of Qantas CEO Alan Joyce should act as a cautionary tale for any CEO that pursues profit at any cost and at especially at the expense of people, because customers hold a lot more power than they realise and it’s only in very few cases that they don’t have the choice to take their business elsewhere. 

As consumers, we must demand transparency, fairness and accountability from these businesses and vote with our feet when we don’t get it. Only then can we truly build a marketplace that works for everyone, not just the privileged few.

This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.